Right now Bitcoin is experiencing a gigantic drop in hashrate due to the Chinese Communist Party (CCP) shutting down mining in the country. Already being dubbed “The Great Hashrate Migration,” a huge amount of mining equipment is being unplugged and shipped to friendlier jurisdictions around the world. Some Chinese miners have taken to booze as expectations are that nearly all mining operations will be shut down. The largest difficulty adjustment in Bitcoin’s history is likely to occur as a result of the disruption.
The motivations for such a move are opaque. Rumors abound that the CCP is preparing a rollout of their own central bank digital currency around the 2022 Winter Olympics. Mining can be a crafty method of capital flight, sending bitcoin straight into an offshore cold wallet which is a nuisance for the Party. Corrupt cadres could be siphoning energy into their own operations or paid off by local miners. Maybe a younger, digital-native clique in the Party got a little too much bravado and crypto-wealth for Xi Jinping’s tastes. Others have suggested the CCP takes climate change very seriously and is taking a leap forward for the good of the planet. Whatever the reasoning, the CCP decided mining is a threat to their power in some way. The result is that massive amounts of Bitcoin infrastructure currently residing in China is getting the hell out of there as rapidly as possible.
China is the perennial Bitcoin hot topic and a common roll on the FUD dice. Peter Thiel made news earlier this year with an unsettling sound bite that bitcoin could be a “Chinese financial weapon,” stating:
“From China’s point of view they don’t like the US having [the dollar as the world] reserve currency because it gives us a lot of leverage … The euro you can think of as, in part, a Chinese weapon against the dollar [as an additional reserve currency] … Even though I’m sort of a pro-crypto, pro-bitcoin maximalist I do wonder whether at this point bitcoin should also be thought of as, in part, a Chinese financial weapon against the U.S. It threatens fiat money, but it especially threatens the U.S. dollar … China is long bitcoin and perhaps from a geopolitical perspective the US should be asking some tougher questions about exactly how that works.”
Americans are notoriously bad at understanding China — its history, culture, political system and motivations — and perhaps Thiel is no exception despite his level of credibility. But if China is long bitcoin, they either had an epic Elon Musk-style public turn-around or a brilliantly planned leveraged short to get cheaper sats on the other side. Because if the CCP considered bitcoin a financial weapon against the U.S., they just unilaterally disarmed themselves.
It’s also possible that Thiel wasn’t totally wrong but that a shift in attitude occurred inside the Politburo creating a sense of urgency to implement strict controls on Bitcoin in China. As recently as April officials with the People’s Bank of China were stating, “the main role we see for crypto assets going forward … is investment alternative.” The CCP made several half-hearted attempts at restrictions on Bitcoin and crypto-trading over the last decade. When news of this mining ban spread it was initially underestimated by many long-time Bitcoiners until on-the-ground reports confirmed that this time the CCP was dead serious and acting swiftly. This turn of events begs the question: what changed the Party line?
Bitcoin is a monkey wrench thrown into history that Marx, Lenin and Mao couldn’t fathom.
For much of the 20th century the “scientific” next stage of history after capitalism was generally presumed to be socialism, even among top ranks in the capitalist world. Marxist theory of history as class struggle: progressing from feudalism to capitalism, then capitalism to socialism and finally from socialism to communism when — according to the science — the state withers away, classes are abolished and humans become the new Communist Übermensch, free from alienation and want. That narrative did and still does carry weight as almost a predestined arc of history towards progress. Eschatology for the non-believing materialist.
JULY 15, 2021
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